Will failure to reach a budget deal by March 1 ignite another round of government job cuts?
Automatic spending cuts totaling $85 billion are scheduled to take effect Friday and will impact federal agencies, including transportation and defense, as well as cut aid to states.
Instead of finding a solution, Democrats and Republicans are arguing the overall impact of the cutbacks, with Democrats taking a “sky-is-falling” stance while Republicans argue that the cuts, which amount to less than 3% of the $3.5 trillion budget, will barely be felt by most Americans. The truth, as usual, probably lies somewhere in the middle.
“The thousands of federal workers forced to take unpaid furloughs will certainly feel the pinch in their annual budgets," said John A. Challenger, chief executive officer of Challenger, Gray & Christmas, Inc. "Meanwhile, state governments will have to pass along the cuts by eliminating jobs. In Missouri, for example, the automatic budget cuts will slash about $12 million in school funding and will put about 160 teaching jobs at risk. That may not seem like a lot of jobs in the big scheme of things, but it’s everything to the 160 teachers who could ultimately find themselves unemployed due to political gamesmanship,”
Last year, announced job cuts by government agencies fell to 19,128 after reaching 142,503 in 2011 and 183,064 in 2010. What will be the overall economic impact of automatic budget cuts that kick in March 1? Will automatic budget cuts send government job cuts to 2010-2011 levels? Are consumers and businesses spending enough now to hold up the economy if government spending declines?